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Commodities Are the Best Bargain Now—Here’s What to Buy

Commodities / Investing 2016 Aug 26, 2016 - 06:03 PM GMT

By: John_Mauldin

Commodities

TONY SAGAMI writes: What kind of investor are you? Are you the buy-high-sell-higher (trend continuation) type? Or are you a bargain hunter who likes beaten-down (trend reversal) opportunities?

The former type of investor is now in heaven. With the stock market at new highs, there are many stocks on fire.

But if you’re looking for bargains, the pickings are pretty slim.


Don’t worry. There are still many places to invest your money. I'm talking about hard assets, aka commodities.

Why invest in commodities now?

Hard assets go well beyond real estate and gold. They include all types of natural resources like oil, wheat, copper, timber, coffee, zinc, and pork bellies.

Investors often overlook natural resources. But this asset class has been beaten down and should be at the top of every bargain hunter’s list.

You should consider commodities for two reasons:

  • Commodities don’t usually move in sync with the stock market, so they will help diversify your investment mix and reduce risk. Since 2000, there has been only a 35% correlation between commodities and the stock market.
  • If you buy at the right time, you can make a mountain of money in commodities.

Take a look at Hilary Clinton. In the 1970s, she opened a commodity trading account with a company called Refco and seeded it with $1,000. Mrs. Clinton turned that $1,000 into over $100,000 in just 10 months. That’s a whopping 9,000% return.

The Wall Street Journal stated, “Over 10 months, buying and selling futures contracts in a variety of commodities, especially cattle, Mrs. Clinton after various ups and downs had made nearly $100,000, and in July 1979 got out of the market.”

Hillary should have kept trading. At that pace, she would have made $700 million in three years and a couple trillion in 10 years.

My point is that investing in commodities can be very rewarding. And given the low prices that many natural resources are trading at right now, you should think about adding them to your portfolio.

The best way to invest in commodities

There are many ways to invest in commodities (including futures like Mrs. Clinton). But, the best way for most investors is via exchange-traded funds.

Name

Ticker

Commodity

PowerShares DB Commodity Index Tracking Fund

DBC

All

United States Oil Fund

USO

Energy

iPath Bloomberg Commodity Index Total Return ETN

DJP

All

iShares S&P GSCI Commodity-Indexed Trust ETF

GSG

All

PowerShares DB Agriculture Fund

DBA

Food

United States Commodity Index Fund

USCI

All

United States Natural Gas Fund

UNG

Energy

iPath Bloomberg Grains Subindex Total Return ETN

JJG

Food

iPath Bloomberg Sugar Subindex Total Return ETN

SGG

Food

The Teucrium Wheat Fund

WEAT

Food

iPath Bloomberg Copper Subindex Total Return ETN

JJC

Metals

iPath Bloomberg Cocoa Subindex Total Return ETN

NIB

Food

The Teucrium Soybean Fund

SOYB

Food

iPath Bloomberg Livestock Subindex Total ReturnSM ETN

COW

Food

iPath Bloomberg Nickel Subindex Total Return ETN

JJN

Metals

The Teucrium Sugar Fund

CANE

Food

iPath Bloomberg Industrial Metals Subindex Total Return ETN

JJM

Metals

United States Diesel Heating Oil Fund

UHN

Energy

United States Copper Index Fund

CPER

Metals

iPath Bloomberg Aluminum Subindex Total Return ETN

JJU

Metals

iPath Pure Beta Cotton ETN

CTNN

Food

iPath Pure Beta Nickel ETN

NINI

Metals

iPath Pure Beta Grains ETN

WEET

Food

PowerShares DB Oil Fund

DBO

Energy

PowerShares DB Base Metals Fund

DBB

Metals

iPath Bloomberg Coffee Subindex Total Return ETN

JO

Food

PowerShares DB Energy Fund

DBE

Energy

The Teucrium Corn Fund

CORN

Food

Two ETFs that track a broad basket of commodities are the PowerShares DB Commodity Index Tracking Fund (DBC) and the iShares S&P GSCI Commodity-Indexed Trust (GSG).

If you prefer a more concentrated strategy, you won’t have any problems finding ETFs for specific niches—from coffee to copper, to corn.

As always, timing is everything, so any bargain hunter worth his salt should be watching natural resources and commodities. This is especially true if you think that ZIRP, NIRP, and QE will result in the wild return of inflation.

Subscribe to Tony’s Actionable Investment Advice

Markets rise or fall each day, but when reporting the reasons, the financial media rarely provides investors with a complete picture. Tony Sagami shows you the real story behind the week’s market news in his free weekly newsletter, Connecting the Dots.

John Mauldin Archive

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